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9 October, London




© OECD/IEA 2012
Iraq: the energy context

       Oil & natural gas resources are immense & the costs of production
      are among the lowest in the world
       Already the world’s 3rd largest oil exporter, with plans to expand
      oil & natural gas production rapidly
       Natural gas is an under-utilised resource – more than half of the
      natural gas produced is flared
       Catching up & keeping pace with rising demand for electricity
      is critical to national development
       Energy infrastructure & institutions, while improving, continue to be
      a serious constraint:
           Legacy of damage & poor maintenance
           Lack of consensus on governance of the hydrocarbons sector

© OECD/IEA 2012
Oil is the cornerstone of Iraq’s economy

                              GDP, share of oil export revenues, population in 2011

                                                                  $578 billion
                                                 $482 billion

                                  $177 billion
                   $115 billion                                                       GDP
                                                                                      Oil export
                                                                                      revenues
                       72%           55%            24%              52%

                       Iraq         Kuwait           Iran        Saudi Arabia
                     31 million     3 million     75 million       28 million     Population




                  Twin challenges for Iraq are to increase its oil revenues & then to use them
                               to support greater diversification of its economy
© OECD/IEA 2012
Oil is poised for a major expansion

                           Iraq oil production                       Iraq oil exports
                  mb/d 9                                  mb/d 9                        Other
                                                 North
                       8                         Centre        8                        Asia
                       7                         South         7
                       6                                       6
                       5                                       5
                       4                                       4
                       3                                       3
                       2                                       2
                       1                                       1

                           2012   2020   2035                      2012   2020   2035


       Production more than doubles by 2020 & reaches more than 8 mb/d by 2035,
     with Iraq becoming a major supplier to Asian markets, especially to China & India
© OECD/IEA 2012

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Why The Us Wants War
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The document summarizes that the 1991 Gulf War in Iraq cost $40 billion total, with 75% paid by Kuwait and Saudi Arabia from increased oil profits. The war caused oil prices to rise from $15 to $42 per barrel, generating $60 billion in extra profits - half to oil companies and half to Arab governments. Most major oil companies are American-owned, so the US government and private companies profited over $20 billion. The document argues the real motivation for the war was economic gain from higher oil prices and profits, not humanitarian or freedom reasons as publicly claimed.

What will determine the pace of growth?

       Political consensus on oil governance & legal framework

       Speed & coordination of investment along the supply chain
                   Avoiding bottlenecks in storage & transportation
                   Sufficient water to support oil production
                   Drilling rigs & expertise

       Iraq’s long-term oil & natural gas development strategy
                   Our High Case of 9 mb/d by 2020 would equal the highest sustained
                  growth in the history of the oil industry

       International market conditions


© OECD/IEA 2012
Iraq leads global oil production growth

                            Growth in oil production, 2011-2035


                                    Non-OPEC
                                      12%

                                                       Iraq
                                                       45%
                               Rest of OPEC
                                   42%




              Iraq accounts for 45% of the growth in global production to 2035;
      by the 2030s it becomes the second-largest global oil exporter, overtaking Russia
© OECD/IEA 2012
Iraq takes its place on the global gas map

                                   Growth in key natural gas producers, 2011-2035
                         China
                         Russia
                  United States
                      Australia
                  Turkmenistan
                           Iraq
                         Qatar
                           Iran
                          Brazil
                        Algeria
                                          50       100       150       200      250 bcm


            Iraq can potentially provide a very cost-competitive gas supply by pipeline to
            neighbouring countries or to Europe and – via liquefied natural gas – to Asia
© OECD/IEA 2012
Gas moves from sideshow to centre stage

                                    Iraq’s natural gas balance
                  bcm 100
                                                                                Production
                      80                                                        Demand

                      60


                      40

                      20



                            2010    2015   2020    2025    2030    2035


                  Reductions in gas flaring & development of new gas fields will be needed
                       to meet Iraq’s growing domestic needs & its export ambitions
© OECD/IEA 2012

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Catching up with power demand

                                      Iraq electricity generation
             TWh 300
                                                                     Shortfall in generation
                  250                                                Hydro & other renewables

                                                                     Natural gas
                  200
                                                                     Oil
                  150

                  100

                  50


                        2010   2015   2020    2025    2030    2035


     Oil helps to eliminate the power deficit in 2015. But without a longer-term shift to
      gas-fired power, Iraq would forego more than $500 billion in oil export revenue
© OECD/IEA 2012
A chance to transform Iraq’s prospects

                                    Iraq annual oil and natural gas revenues
              Billion dollars 350
              (2011)
                              300

                             250

                             200

                             150

                             100

                              50


                                        2012             2020            2035


                $5 trillion in cumulative export receipts is 10% of all revenues
        from global oil trade; Iraq’s GDP in 2035 rises to the level of Saudi Arabia today
© OECD/IEA 2012
A step-change in energy investment

                         Iraq annual average requirement for energy investment

       Billion dollars 30
       (2011)                                                                        Natural gas
                       25                                                            Electricity
                                                                                      Oil
                        20

                        15

                        10

                         5


                                  2011           2012-2020         2021-2035


                  The overall investment bill of $530 billion is 10% of oil export revenues,
                  but annual spending needs to increase quickly over the current decade
© OECD/IEA 2012
Delay would come at a high price

                                 Iraq oil production profiles
                  mb/d 10

                                                                    Central Scenario
                        8

                        6
                                                                    Delayed Case

                        4

                        2



                        2000   2005 2010 2015 2020 2025 2030 2035


     If investment & oil production growth is delayed then global oil markets tighten,
     with prices $15 higher in 2035, & Iraq’s cumulative GDP would be $3 trillion lower
© OECD/IEA 2012

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Iraq’s transformation
has global implications

       With 45% of the anticipated growth in global production to 2035,
      Iraq is key to the long-term outlook for oil markets

       Successful oil & gas development requires a shared vision for the
      sector & efforts to coordinate investment all along the supply chain

       Delay would come at a high cost to Iraq and to international markets

       Productive use of natural gas is critical to a healthy domestic balance

       Oil export revenues can provide the foundations for a modern and
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© OECD/IEA 2012

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Iraq Energy Outlook Special Report

  • 1. 9 October, London © OECD/IEA 2012
  • 2. Iraq: the energy context  Oil & natural gas resources are immense & the costs of production are among the lowest in the world  Already the world’s 3rd largest oil exporter, with plans to expand oil & natural gas production rapidly  Natural gas is an under-utilised resource – more than half of the natural gas produced is flared  Catching up & keeping pace with rising demand for electricity is critical to national development  Energy infrastructure & institutions, while improving, continue to be a serious constraint:  Legacy of damage & poor maintenance  Lack of consensus on governance of the hydrocarbons sector © OECD/IEA 2012
  • 3. Oil is the cornerstone of Iraq’s economy GDP, share of oil export revenues, population in 2011 $578 billion $482 billion $177 billion $115 billion GDP Oil export revenues 72% 55% 24% 52% Iraq Kuwait Iran Saudi Arabia 31 million 3 million 75 million 28 million Population Twin challenges for Iraq are to increase its oil revenues & then to use them to support greater diversification of its economy © OECD/IEA 2012
  • 4. Oil is poised for a major expansion Iraq oil production Iraq oil exports mb/d 9 mb/d 9 Other North 8 Centre 8 Asia 7 South 7 6 6 5 5 4 4 3 3 2 2 1 1 2012 2020 2035 2012 2020 2035 Production more than doubles by 2020 & reaches more than 8 mb/d by 2035, with Iraq becoming a major supplier to Asian markets, especially to China & India © OECD/IEA 2012
  • 5. What will determine the pace of growth?  Political consensus on oil governance & legal framework  Speed & coordination of investment along the supply chain  Avoiding bottlenecks in storage & transportation  Sufficient water to support oil production  Drilling rigs & expertise  Iraq’s long-term oil & natural gas development strategy  Our High Case of 9 mb/d by 2020 would equal the highest sustained growth in the history of the oil industry  International market conditions © OECD/IEA 2012
  • 6. Iraq leads global oil production growth Growth in oil production, 2011-2035 Non-OPEC 12% Iraq 45% Rest of OPEC 42% Iraq accounts for 45% of the growth in global production to 2035; by the 2030s it becomes the second-largest global oil exporter, overtaking Russia © OECD/IEA 2012
  • 7. Iraq takes its place on the global gas map Growth in key natural gas producers, 2011-2035 China Russia United States Australia Turkmenistan Iraq Qatar Iran Brazil Algeria 50 100 150 200 250 bcm Iraq can potentially provide a very cost-competitive gas supply by pipeline to neighbouring countries or to Europe and – via liquefied natural gas – to Asia © OECD/IEA 2012
  • 8. Gas moves from sideshow to centre stage Iraq’s natural gas balance bcm 100 Production 80 Demand 60 40 20 2010 2015 2020 2025 2030 2035 Reductions in gas flaring & development of new gas fields will be needed to meet Iraq’s growing domestic needs & its export ambitions © OECD/IEA 2012
  • 9. Catching up with power demand Iraq electricity generation TWh 300 Shortfall in generation 250 Hydro & other renewables Natural gas 200 Oil 150 100 50 2010 2015 2020 2025 2030 2035 Oil helps to eliminate the power deficit in 2015. But without a longer-term shift to gas-fired power, Iraq would forego more than $500 billion in oil export revenue © OECD/IEA 2012
  • 10. A chance to transform Iraq’s prospects Iraq annual oil and natural gas revenues Billion dollars 350 (2011) 300 250 200 150 100 50 2012 2020 2035 $5 trillion in cumulative export receipts is 10% of all revenues from global oil trade; Iraq’s GDP in 2035 rises to the level of Saudi Arabia today © OECD/IEA 2012
  • 11. A step-change in energy investment Iraq annual average requirement for energy investment Billion dollars 30 (2011) Natural gas 25 Electricity Oil 20 15 10 5 2011 2012-2020 2021-2035 The overall investment bill of $530 billion is 10% of oil export revenues, but annual spending needs to increase quickly over the current decade © OECD/IEA 2012
  • 12. Delay would come at a high price Iraq oil production profiles mb/d 10 Central Scenario 8 6 Delayed Case 4 2 2000 2005 2010 2015 2020 2025 2030 2035 If investment & oil production growth is delayed then global oil markets tighten, with prices $15 higher in 2035, & Iraq’s cumulative GDP would be $3 trillion lower © OECD/IEA 2012
  • 13. Iraq’s transformation has global implications  With 45% of the anticipated growth in global production to 2035, Iraq is key to the long-term outlook for oil markets  Successful oil & gas development requires a shared vision for the sector & efforts to coordinate investment all along the supply chain  Delay would come at a high cost to Iraq and to international markets  Productive use of natural gas is critical to a healthy domestic balance  Oil export revenues can provide the foundations for a modern and prosperous Iraqi economy © OECD/IEA 2012